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Over and over, I’ve stressed a cautious, careful and defensive investment stance since early last summer.
CarMax (KMX) sells more used cars and trucks than any other dealer in the U.S. It owns 161 locations in 79 markets, from California and Arizona in the Southwest, to Massachusetts and Pennsylvania in the Northeast, to Florida and Tennessee in the Southeast.
That makes it a pretty good bellwether for the credit-cycle-driven auto business. And judging from its earnings report this week, that business is breaking down big-time.
The firm missed earnings targets for the third quarter in a row. It missed revenue targets by $60 million, with sales growth slowing to its worst pace in six years. And it warned of rising costs and lackluster profit from auto lending. The stock dropped another 5%, bringing its 12-month losses to a hefty 29%.
Then there’s Werner Enterprises (WERN), a key cog in the trucking and transportation industry. You’ve probably passed or have been passed by its yellow-on-blue trucks on an interstate highway somewhere.
Well, the company just warned that second-quarter earnings would miss analyst estimates by a country mile — coming in at as little as 21 cents per share versus forecasts of 40 cents per share. The culprit? "More challenging market conditions" in the freight shipping business and a lousy market for used, heavy-duty trucks. FedEx (FDX) followed up with its own profit warning hours later, though it blamed some of its problems on rising pension and network expenses.
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| Multiple earnings warnings have been issued by some of the nation’s largest REITs. |
As for commercial real estate, the Wall Street Journal was the latest to report on trouble there — particularly in the multifamily sector. The problem? Developers have been building thousands and thousands of apartments in cities all over the country, using cheap, easy money to do so. But with construction activity running at more than double the historical pace, and demand slowing, renters are increasingly demanding (and getting) concessions. That’s leading to multiple earnings warnings from some of the nation’s largest real estate investment trusts (REITs).
I’ve said before that the credit cycle and the economic cycle are inextricably linked. When credit gets tighter for business borrowers, or commercial real estate borrowers, or auto borrowers, companies can’t spend as much, developers can’t spend as much, and consumers can’t spend as much. Result: The economy starts grinding to a halt.
[Read More – The Consequences of Reckless Lending- Mike Larson]
The latest news from Corporate America shows this isn’t some hazy forecast about the distant future, one that may or may not be confirmed. It’s happening in the here and now, and it’s gathering momentum every day.
So yes, the Brexit vote is getting a ton of press this morning — and I’ll be sure to update you on the implications later today. But in the bigger picture, the turn in credit is the single-most important factor that will drive the economy and markets over time.
The way I see it, you can do one of two things as a result. You can lose money on stocks like CarMax and Werner and apartment REITs like Equity Residential (EQR) as the "hidden hand" of the credit cycle wreaks havoc on them. Or you can go on the offense, and use the credit cycle to rack up potentially large profits.
That’s exactly what I’ve been doing in my All Weather Trader service over the past several months. Thanks to my credit cycle analysis, my subscribers had the chance to rack up gains of as much as 122%, 140%, 203%, even 269.7% last fall and earlier this year.
[Read More – Yet ANOTHER Billionaire Warns About Coming Chaos – Mike Larson]
Now, the methodology I discuss in my new e-book is suggesting even-bigger potential profits are coming down the pike. So make sure you give it a read here, and take action on the recommendations you’ll find in it. Then stay tuned — I’ll have much more for you in the days and weeks ahead.
Until next time,
Mike Larson
{ 21 comments }
Congratulations to the British for showing the world what soverienty, liberty and freedom are all about.
With best wishes from Will
The formation of the EU was an American initiative to facilitate Amarican economic and political control of 28 diverse countries in Europ,aimed to penetrate and destroy,with the help of NATO the new Russian Federation.
American foreign policy in Europe created a disfunctional,undemocratic super-state governed by unelected,faceless bureacrats.
I wish congratulate the British people on their vote for democracy and self-determination
in spite of Obama’s arrogant threat to send the UK to the end of the queu if they dare to
vote for Brexit.
Yes Will, agreed. It is a courageous decision from a country and community fed up with decisions being made in Brussels. We need the power of self determination at an individual level being returned to the people. Well done U.K.
I agree. Now I hope Trump can lead us out of the spiral our economy is in.
Remember let’s vote for the person who is least going to hurt you, not the one who promises you everything like Clinton.
great information. thanks, mike. gonna get ugly
If you make a decent living and you can walk with safety in the street most of the time, why do you need liberty, sovereignty and freedom? Most people in Britain have a good standard of living, so why did they need to destroy all of that overnight?
They left a building slated for demolition. Jim
apollocreed
Obviously you know nothing about the European Union (EU)!
apollocreed: It appears that you do not know what soverienty, liberty and freedom are all about; it is a matter if you want to exist or to live. It is also a matter of keeping that good standard of living that you mention, or having it slowly drained to support the benefit of others. The choice is yours; maybe it will take you longer than some to understand, but time is not on your side as the British have now expressed to the world.
“Those who would give up essential Liberty, to purchase a little temporary Safety, deserve neither Liberty nor Safety.”
BF 1755
If you don’t understand that Liberty, Sovereignty and Freedom are important my guess is you don’t understand the ‘why’ of the vote. And, are you really suggesting that the Brits, of which I am one, I have dual nationality, have destroyed their living standard overnight ?
Hi Mike
We have entered a world of uncertainty. The buying opportunities will not be immediate as more uncertainties unfold. Great time to be in cash.
I agree with Will , the British people want to rid themselves of the parasites of Brussels. This will shake the markets for a while, but remember what happened to the Soviet Union, in the ninetys, they are still in existence, and are buying most gold than the U.S. Long live Britania!!!
Exactly! Sure there’ll be short-term pain but ultimately there’ll be long-term gain, especially when the EU/Eurozone collapses over the next few years (naturally it’ll all be blamed on Britain).
Cash is king!
As an English expat. living in Canada I congratulate England for voting for freedom. The Scottish and N. Irish have to make some big decisions over the next few months. They voted overwhelmingly to stay in the EU.
Now Brits have expressed their opinion, can they actually get out without some crooked government pulling some stunt to prevent it from happening?
We’ll see…
If ANYONE believes that truth, freedom, liberty and sovereignty are not better than slavery, subjugation, and silence, they need to take a long hard look in the mirror, and find where their heart went.
On the surface, everything seems quiet, but the population is being kept docile so they cannot learn how enslaved they truly are by things like television, booze, and the medias comforting daily lie. This is that George Orwell speak: War is Peace, Freedom is Slavery, Ignorance is Strength. The left has the world convinced they don’t exist. The sheep don’t believe that evil exists, but GB knows it exists, and GB has saved itself from the state-run terror that the EU will bring down on the individual nation states in the months to come.
Right is now wrong — and wrong is now right … upside down, backwards and we are all buying it… a tragically..
Let’s get some perspective: only 19 of 28 European countries are in the European Union. Note that Norway is not in the EU, but it is in a trading agreement with it – so why is it so bad for member countries to change?!
There is no need to panic, the UK – EU financial industry will go through some bumps in the road but it is not as bas as the media portrays it. Congrats to the UK!
If the Power brokers in Brussels and Frankfurt would not have keep chipping away at UK sovereignty it would not have come to this. Britians are no dummies and they wisely kept their currency intact over the years as a hedge against just this.
It’s my understanding this is only a referendum, not set in stone yet. I applaud the Britts…We the people for the people.
Do you have to pay for this ebook? Theirs no such thing as a free lunch in life.